Institutional specialization

Bernardo Guimaraes and Kevin Sheedy

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper presents a theory of institutional specialization in which some countries uphold the rule of law while others choose extractive institutions, even when countries are ex-ante identical. The driving force of specialization is that for incumbents in each country, the first steps to the rule of law have the greatest cost. Good institutions require sharing power and rents, but in places where power is already shared broadly, each power base or branch of government underpinning institutions is individually less important and thus receives lower rents. Countries with diametrically opposed institutions have a symbiotic relationship in the world equilibrium. The transition from sail to steam-powered vessels in 19th-century trade provides suggestive evidence supporting the theory.

JEL-codes: F00 O40 P48 (search for similar items in EconPapers)
Date: 2024-07-01
New Economics Papers: this item is included in nep-inv
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Published in Journal of International Economics, 1, July, 2024, 150. ISSN: 0022-1996

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https://researchonline.lse.ac.uk/id/eprint/122547/ Open access version. (application/pdf)

Related works:
Journal Article: Institutional specialization (2024)
Working Paper: Institutional Specialization (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:122547

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